They started out as virtual currencies like bitcoin, but some have evolved to involve investment schemes.

Yesterday, the Commercial Affairs Department (CAD) of the Singapore Police Force and the Monetary Authority of Singapore (MAS) jointly issued a consumer advisory on the risks of digital token- and virtual currency-related investment schemes.

They have noted the emergence of initial coin (or token) offerings (ICOs) and other investment schemes involving digital tokens here. Some recent ICOs were TenX in June and Cross Coin last month.

"Members of the public are advised to exercise due diligence to understand the risks associated with ICOs and investment schemes involving digital tokens," the advisory said.

The police said they have received slightly more than 100 reports involving five such schemes from 2015.

Last week, MAS clarified that ICOs face regulation here if they are structured like securities, debt or units in a collective investment scheme under the Securities and Futures Act (SFA).

TSMP Law Corp's joint managing partner Stefanie Yuen Thio said investor awareness is the best way to protect the market, and the advisory is an important step in dealing with this new investment format.

"The advisory is helpful in explaining the risks of investing in ICOs and highlighting how potential investors can protect themselves," she said.

Since January last year, the Consumers Association of Singapore (Case) has received five complaints over digital currencies such as bitcoin.

LACK OF PAYOUT

The complaints were focused on lack of payouts after investing or unsatisfactory services.

Mr Loy York Jiun, Case's executive director, urged investors to do due diligence before signing any agreement and encouraged them to deal with MAS-regulated entities.

He said: "Many of these investments appear to be highly speculative in nature, and consumers should be especially wary where there are promises of exceptionally high returns."

ICOs and other investment schemes involving digital tokens may be structured in many ways with different business propositions.

For example, they may seek to develop a new digital platform or they may offer an opportunity to invest in a property, business, and assets, or with a promise of certain benefits or monetary returns.

CAD and MAS advised that where sellers of digital tokens fail to highlight risks, consumers should make the effort to find out more about the underlying project, business or assets.

Consumers who suspect fraud should report such cases to the police.

Mr Anson Zeall, chairman of Access, the Singapore Cryptocurrency and Blockchain Industry Association, urged its members to seek legal advice and comply with SFA regulation prior to conducting an ICO.